Finance Thoughts

I don’t know when exactly it happened, but somewhere along the way, I think about 2002, I really got into keeping track of my finances.

Since birth I had been the most unorganized person when it came to money. Never knew how much I had, never thought about saving, never cared. It took having to work all summer between Freshman and Sophomore years of college to pay off my credit card debt to realize how life-sucking debt can be. Especially stupid debt like credit cards.

When Ann and I got married one of the great influences she brought to me was the European aversion to debt. “You’re not supposed to have debt for anything, except your house. If you can’t pay for something but buy it anyway, you’re not very well regarded in Belgium.” Well, honestly, the threat of being thought badly by the Belgians wasn’t that big of a deterrent, but after reading The Millionaire Next Door Ann and I changed everything.

First, we made a pact to get rid of all unnecessary debt. We had a little under two grand on a credit card for various plane tickets and big ticket items that we wanted to get points for, and we concentrated on clearing that. Then, we sat down and made a budget of all our monthly expenses. Then we made a savings plan for the year. The next thing I know, I’m sitting down in front of the computer every night putting my all my expenses for the day. Every expense. Every day.

It became an obsession. Seeing how we were spending our money. Seeing if we could hit our targets. Setting a budget and then fine tuning it so that you could average it out over 12 months and still come out to within fifty bucks of your estimated costs for that line item. Electricity. Cell phones. Hair cuts. Gifts. Car maintenance. Gas. Train ticket to New York. Savings. Each month it was all given an amount and we actively tried to steer our behavior so that we would “meet budget”. If we spent most of our “dining out” budget in a month, we would eat in for ten straight days.

It was really impressive.

We stopped it when we moved to the Netherlands, although we did make a budget so that we at least had an idea of what our monthly costs are. I miss it in a lot of ways, I feel like I have less control over my finances now than when I was putting in every $3.50 lunch at the cafeteria or every $7 movie ticket.

My favorite activity was the monthly net worth calculation. Not because I love money and want to be rich (although I do kind of), but because every month we plugged in the numbers from all our various assets, and all our various debts, and every month we got to see the progress we were making.

Until we started tracking expenses in late 2002 we had no idea what our net worth was. But after Sep 2002 I was able to calculate it almost to the dollar, and how much it’s growing, and what the target for the end of the year is. It’s a great feeling, to feel like you reached in and tamed one of the most unruly parts of your nature.

It makes you believe that people can indeed change.

It’s harder now that we are overseas. We haven’t done the net worth calculation in a year (probably because we’re scared to see how much we’ve fallen off now that we aren’t watching it like hawks). All our debt is gone, and has been for a while. Even the car payment we got rid of when we refinanced our condo. I almost feel adult. And then I think about all the huge expenses for the future and get scared again.

My latest gig is retirement. Yes, I know I am like thirty years from retiring, but there are so many horror stories about people who lost their nest eggs in the dot com bubble, or people who aren’t prepared for it at all. I don’t want to be one of them. My parents are my role models in this regard. Although it would be nice to buy a fancy car before the age of sixty.

My mom and dad bought Hondas and drove them into the ground before buying another one. My family had cars the way that some have pets, keeping them until it’s a mercy to put them down. Measuring phases of your life by which model Honda we had. It was only after my dad was 60 that he finally indulged and bought a Lexus.

I am thinking about this now because I just sat down and rebalanced by 401k. It’s amazing, I haven’t really sat down and measured the performance of my biggest investment device until about three months ago, and then I come to find out that over half my money is invested in the worst performing funds that are available to me. God, I felt so stupid for not having tracked this earlier. Like two years ago!

Money is always a touchy issue. There’s a lot that gets wrapped up in any discussion about money. And living in Europe I really have seen the difference in attitudes about money here. People really do make a trade here. They make a deal with their culture, their government, whatever, and the deal goes like this: “I’ll be a productive member of society, and give you half of every dollar I make, but in return you’re going to provide all services for me, forever. I’ll agree not to want Lexus cars and big houses, and I’ll put up with universally mediocre levels of service, and I won’t run up personal debt or send my kids to a private school, but for that sacrifice you are going to give me social security in the broadest sense of the word, until the day I die.”

People here don’t look up to people who make a lot of money. There’s a general consensus I feel that they are breaking the psychological contract. They are screwing with the deal that everyone else has agreed to, and no one likes that. I guess subconsciously it’s viewed as a threat to the security of the system. I also see a lot of psychological trickery whereby people make some distinction in their minds about rich people, believing that they are a unique breed and therefore simply alien. So far on another planet as to almost not be human.

I’m not European so I have a hard time understanding, but people here build it into their patterns of behavior that being rich is not a good thing, not something you should aspire to, and that if someone is rich, it’s probably because they did things that are against the social good in some way. There are no honest rich people. Because, if you were truly thinking about the social good, you wouldn’t be trying to make all that money for yourself and instead you’d work within the system that keeps everyone secure.

It’s interesting. Ultimately, we all do what we must. But it’s interesting to see how the rules of the game are set up in different cultures. I know I could never really buy into it. The American in me would never be comfortable with leaving my future welfare in the hands of politicians.

Come on. They’re politicians!